Argentum Exploration Limited v The Silver

By a majority, the Court held that State Immunity Act 1978, section 10(4)(a), applies to salvage claims concerning state-owned cargo that has become wreck. The relevant use is assessed by reference to the maritime circumstances that gave the property its status as cargo, before salvage services are rendered. A state owner uses cargo commercially when it arranges its purchase and carriage under commercial contracts, even if the cargo is ultimately intended for sovereign purposes. The conversion of ship and cargo into wreck does not remove them from the subsection. The Court also gave guidance that a Receiver of Wreck has no power to determine whether salvage is due or its amount.

The Republic of South Africa owned silver carried on the SS TILAWA, which sank in 1942. The silver was salvaged in 2017 and delivered to the Receiver of Wreck in Southampton. Argentum brought an action in rem seeking a salvage award.

South Africa claimed state immunity under section 10(4)(a) of the State Immunity Act 1978. Sir Nigel Teare dismissed its application in [2020] EWHC 3434 (Admlty). The appeal concerned whether the vessel and cargo were in use or intended for use for commercial purposes when the salvage cause of action arose, whether wreck was within section 10(4)(a), and what powers the Receiver had under the Merchant Shipping Act 1995.

1. The appeal was dismissed by a majority. Lord Justice Popplewell and Lady Justice Andrews held that section 10(4)(a) applies in substance to salvage claims against state-owned cargo, including cargo which has become wreck. A derelict vessel and derelict cargo remain a ship and cargo for the purposes of the subsection.

2. The phrase “at the time when the cause of action arose” refers to the maritime circumstances which originated the salvage claim and gave the property its status as cargo. The inquiry therefore looks back to the time before salvage services were rendered, in this case when the vessel sank in 1942. The later passage of time and the completion of salvage operations did not alter that analysis.

3. The relevant use was use by South Africa as cargo owner, not use by the shipowner or salvor. South Africa used the vessel and silver for commercial purposes by entering into, or benefiting from, commercial arrangements for purchase and carriage. The intended use of the silver after discharge, including minting sovereign coinage, was irrelevant in this salvage context. The majority also relied on the restrictive theory of immunity, under which the nature of the activity, rather than its purpose, is decisive.

4. The Court considered, obiter, that article 25 of the Salvage Convention did not require a different temporal inquiry. It also gave guidance on the Receiver’s powers. The Receiver has no implied power to decide whether salvage is due or to determine its amount. The Receiver may detain wreck while there is a realistic possibility that salvage will be agreed or established by a court of competent jurisdiction. Once that possibility has gone, the wreck must be released.

5. Lady Justice Elisabeth Laing dissented on section 10(4)(a). She considered that the silver was not in use while being carried and was intended for a substantially sovereign purpose. She agreed, however, with the majority’s guidance on the Receiver’s powers.

• Court of Appeal (Civil Division): appeal from the High Court decision dismissed; [2022] EWCA Civ 1318.
• High Court of Justice, Admiralty Court: South Africa’s state-immunity application dismissed; [2020] EWHC 3434 (Admlty).